PHFI Study Highlights the Need for a Health Focused Fiscal Policy for Tobacco Control

The specific objectives of the study were:

• To highlight the need for a health-focused fiscal policy for tobacco;
• To examine the current tax structure on all tobacco products (smoking and smokeless) and their contribution to revenue generation;
• To examine the changing shares of household expenditure on different tobacco products over the years;
• To provide likely scenarios of revenue generation from an increase in tax on tobacco products and its distributional effects across populations in Indian states [1] ; and,
• To disseminate evidence generated from this exercise for stronger and more effective and health focused fiscal policies at all levels of government in India.

Key Findings

• A 10% increase in cigarette prices will lead to almost 3% decrease in consumption and 7% increase in government revenues
• A 10% increase in bidi prices will lead to almost 5% decrease in consumption and 4% increase in government revenues
• Cigarette excise can be increased by 370% of present levels, leading to a 54% decline in consumption and 115% increase in revenue
• Bidi excise can be increased by 100% of present levels, leading to a 40% decline in consumption and 22% increase in revenue
• In the states of West Bengal, Rajasthan, Uttar Pradesh and Maharashtra, price elasticity for bidi is extremely high with a 10% increase in taxes resulting in a 6-10% decline in consumption
• In India, so far, taxes have not been used effectively to reduce tobacco consumption at the population level.

Dr. Monika Arora, Director Health Promotion PHFI said, “According to the Global Burden of Disease Study 2010, tobacco use is the second largest risk factor for death today. The enormous burden of tobacco use in India is well documented with nearly one million Indians dying each year. With India adopting a national target of 30% relative reduction of tobacco use by 2025, it is paramount that India’s response to mitigate the tobacco problem is strengthened. The WHO recommended MPOWER strategies must be implemented strategically, with international best buys like raising tobacco taxes being adopted in national fiscal policies.”

The study used data from the Global Adult Tobacco Survey (GATS) India, 2009-10 to study tobacco consumption patterns. Household consumption expenditure data on tobacco were obtained from the National Sample Survey Organization (NSSO) Consumer Expenditure Surveys (CES) from 1999-00 to 2011-12. A theoretical model developed by Deaton (1989, 1997) was followed to estimate the own and cross price elasticity of tobacco products. [2] , [3] .

India faces the challenge of double burden of communicable and non-communicable diseases, leading to enormous loss to both society and economy. This is exacerbated by the high tobacco use. More than one-third of Indian adults (34.6 percent, an estimated 275 million persons) consume tobacco products. [4] Among the economic measures outlined in the World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC), tobacco taxation is the most cost effective intervention to reduce tobacco consumption. The FCTC stipulates that all tobacco products be taxed at a tax incidence of 75%.

The World Health Organisation (WHO) theme for this years’ World No Tobacco Day is ‘Raise Tobacco Taxes’. The Union Minister for Health and Family Welfare, Dr. Harsh Vardhan supported for raising taxes on tobacco products during an event organized by PHFI in collaboration with Ministry of Health and Family Welfare and WHO to commemorate World No Tobacco Day 2014 last week. BWI